Frequently Asked Questions

Bankruptcy is the process by which a consumer or a business can eliminate or repay some or all of their debts while being protected by the federal bankruptcy court. It enables debtors to obtain a “fresh start” with their finances.

What are some common reasons for filing for bankruptcy?

There are many reasons why people file for bankruptcy relief: unemployment, large medical debts, over-extended credit, divorce, foreclosure, retirement, disability, and taxes are among the more common reasons.

What is the difference between Chapter 7 and Chapter 13? Are there other Chapters?

A chapter 7 bankruptcy, also called a straight bankruptcy, is the chapter in which most debts can be discharged without payment. Individual debtors are allowed to “exempt” certain of their assets, meaning that they can keep them through a bankruptcy and the assets will not be used to pay creditors.

Chapter 13 bankruptcy is appropriate for people who have gotten behind in mortgage, car, or other secured debt payments and need to get them caught up, who have substantial tax debt, have property that they would lost in a Chapter 7 case, or simply have household income too high to qualify for Chapter 7. A Chapter 13 Plan would require a payment plan lasting three to five year, but the Debtors can bring the secured debt payments current, pay off tax debt which would otherwise be non-dischargeable at a reduced cost and keep the property which they would lose if they had filed a Chapter 7 case.

There are other chapters that are usually not applicable to most consumers: Chapter 9 bankruptcy only is available to municipalities, Chapter 11 bankruptcy is available to businesses or individuals who have substantial debts and assets and can be used to pay off debts while continuing to function as a business. Chapter 11 can also be used by individuals who have too much debt to qualify and cannot otherwise file for Chapter 13 bankruptcy. Chapter 12 bankruptcy is only available to family farmers and fishermen, and Chapter 15 bankruptcy is only relevant in the context of international litigation.

This firm handles consumer bankruptcies under Chapters 7 and 13 for individuals, spouses, and business entities.

What is a discharge?

A discharge is a court order that prevents creditors from attempting to collect a debt and effectively eliminates any personal obligation on that debt. A discharge is the ultimate goal of filing for bankruptcy.

When should I file?

Timing can be very important when filing for bankruptcy. Sometimes immediate filing may be necessary to stop a foreclosure or repossession. However, it is can also be necessary to delay filing in order to qualify for bankruptcy protection or to take full advantage of a discharge. Other factors may affect the timing of filing your bankruptcy petition. Your attorney will be able to determine when is the best time to file after reviewing your case.

What do I need before I file?

It is helpful to bring with you to your initial consultation a list of your debts and assets, recent proof of income (such as pay stubs), as well as evidence of any kind of ongoing or imminent collection actions such as a foreclosure or wage garnishment.

What is the “means test”?

In 2005, the bankruptcy laws changed to add a Means Test in an effort to curb what Congress saw as an abuse of the Bankruptcy Code. The Means Test is a complex analysis of your current income, debt, and monthly expenses to determine the amount of “disposable income.” Debtors whose disposable income is too high will be presumed to be abusing the Bankruptcy code. However, your attorney will be able to either help you pass the Means Test if possible or rebut the presumption of abuse if appropriate circumstances are present.

Will my bank or credit union close my account if I file?

It depends. Some banks may freeze your account, ask you to reaffirm your debt, or take no action. Your attorney will be able to help you plan for the bank's reaction to your bankruptcy.

What is a trustee?

A Chapter 7 trustee is an agent appointed by the Department of Justice, usually an attorney or an accountant, whose primary duty is to liquidate property, avoid certain transfers, and pay money to the creditors, something which occurs in only a very small percentage of the cases filed. In the more typical Chapter 7 case, the trustee will review the bankruptcy petition and related documents and will conduct a 341(a) examination, also known as the Meeting of Creditors. One of our attorneys will be present with you at that meeting and will help guide you through it. The trustee is paid a flat rate per case and is also entitled to a percentage of all assets liquidated.

A Chapter 13 trustee will also review the bankruptcy petition and related documents and will conduct a 341(a) examination, also known as the Meeting of Creditors, where one of our attorneys will be there in attendance with you. After the meeting, the Chapter 13 trustee will advise the Court whether or not he believes your Chapter 13 Plan complies with all of the applicable provisions of the Bankruptcy Code and will make a recommendation as to whether your plan of repayment should be approved by the Court. After your plan is approved, the Trustee's primary duty is to take your plan payment and make payments to your creditors in accordance with your Chapter 13 Plan. The trustee will also monitor your plan to make sure that you are complying with all of its terms.

Do I have to list all of my creditors?

Yes. Federal bankruptcy law requires full disclosure of all debts and the bankruptcy petition must be true and correct, under penalty of perjury. The trustee will ask you about this under oath at the 341(a) meeting of creditors.

Can creditors object to my bankruptcy?

Yes. Your creditors have the right to object to the discharge of a debt or to your bankruptcy case as a whole and we will draft your documents in a manner that minimizes that risk. There are a few, limited grounds upon which a creditor may object such as fraud, false representations, abuse of process, etc. The trustee may also raise similar objections. Our attorneys have strategies to minimize the risk and effect of creditor action. In a Chapter 13, creditors can object to the confirmation of your Chapter 13 Plan

What is a reaffirmation agreement?

Some creditors might try to get you to sign a reaffirmation agreement after you file for bankruptcy. This agreement will effectively treat a specific debt as if it had never been included in the bankruptcy and it will not get discharged. If a reaffirmation agreement is signed, the debtor may later be liable for any deficiency if that property is repossessed and sold for an amount less that the debt. Your attorney will be able to advise you as to whether or not it is in your best interest to sign a reaffirmation agreement.

Will I be able to get my driver's license back?

If you had your license suspended because you owe someone money, the filing of a bankruptcy will likely help get your driver's license back.

What are exemptions?

Exemptions are laws that protect your property from being sold by the bankruptcy trustee. When you file for bankruptcy, everything you own becomes part of the bankruptcy estate. One of our roles as your attorney is to help you protect as much property as possible by using the exemption laws so that your property will not be sold.

What happens to property that is not covered by any exemptions?

Property that is not exempt can be sold by the trustee to pay off creditors. This may be a reason to file a Chapter 13 instead of a Chapter 7. With careful planning, clients can usually exempt all of their property.

Can I keep making payments on certain debts?

Many clients give priority to their creditors and wish to continue to do so. For instance, most clients are current on their car and mortgage payments, but have fallen behind on their credit cards. With our help, clients can continue to make payments to these creditors and avoid repossession or harm to their business relationship. Clients can also continue to make payments to doctors, dentists, relatives, and other who they want to pay.

Can I transfer money and/or property to someone to keep it out of the bankruptcy?

NO. If you are considering bankruptcy you should not dispose of or transfer any property that could be used to pay creditors. If the trustee becomes aware of it, this property can be recovered by the trustee and sold even if it could have been exempted if you were to have kept and listed it in the first place.

What is the difference between a secured and an unsecured debt?

A secured debt is a debt that attaches to a piece of property, an unsecured debt is not attached to any piece of property. An unsecured debt, such as a credit card debt, can only be enforced after the creditor files a lawsuit against you and obtains a judgment. Thereafter it can be enforced by a sheriff levying your bank account or garnishing your wages. In the case of a secured debt, such as a mortgage or a auto loan, if you default on paying of the debt, the creditor can repossess piece of property and sell it with the proceeds going towards paying off your debt and any deficiency will be treated as unsecured debt for which you will be personally liable.

If a creditor already has a judgment against me, will a bankruptcy discharge eliminate that judgment?

Yes. If that judgment was not the product of fraud, willfull and malicious injury, or defalcation and the judgment creditor has not attached any of your property, the judgment will be treated as unsecured debt that will likely be discharged. Under some circumstances, we can have judgment liens released from property so that the judgment can be fully discharged.

Can my business file for bankruptcy?

If you operate a business that is an LLC or a corporation that has incurred significant debt, the business might be eligible to file for bankruptcy. Businesses that are operated as a sole proprietorship or a partnership can only qualify for bankruptcy when the owners file since the owners of the business are personally liable for its debts. A personal bankruptcy might be able to alleviate those business debts.

Will my student loans be discharged?

Generally, student loans cannot be discharged in a bankruptcy. However, there are unique circumstances in which they can be discharged, such as when the repayment of the student loans would result in an unreasonable hardship.

Will bankruptcy stop my utilities from being disconnected?

A bankruptcy will stop your utilities from being shut off. However, you may be required to provide the utility company with some form of adequate assurances in the form of a security deposit that you will be able to make future utility payments. You may also be able to discharge your back payments.

Will my tax debts be discharged?

The laws concerning dischargeability of tax debts is very complex. Your attorney will be able to advise you of your eligibility.

How will my co-signers be affected?

Chapter 7 bankruptcy does not protect co-signers of your debts. In addition to a creditor being able to go after a co-signer for these joint debts, the co-signers credit report may show that the debt was included in a bankruptcy or that a co-debtor filed bankruptcy. Co-signers have limited protection in a Chapter 13.

What is a credit counseling course?

All debtors are required by law to complete a credit counseling course before they file their bankruptcy petition. This only takes about an hour and can be done online. The counseling involves a review of your debt, your income, and your ability to make payments. Your attorney can provide you with a list of approved providers.

What is a financial education course?

All debtors are required by law to complete a financial education course before they are eligible for a discharge. This is to be completed after the case is filed and takes approximately two to four hours. It involves some reading and taking a test but you will have a window of approximately three months to complete it.

Will I lose my home?

If it is your intention to continue living in your home, we will most likely be able to help you do so.

I have a steady income, can I still file?

Yes. Both Chapters 7 and 13 are available to people who are currently employed.

What about my credit?

A bankruptcy will show up on your credit history for up to ten years. However, a bankruptcy will also put you in a better position to rebuild your credit. People generally have better credit after, rather than before, their bankruptcy.

Will I be able to keep my credit cards?

You will most likely want to get rid of your credit cards if you are considering bankruptcy. First, charges made within a certain time-frame before filing for bankruptcy will be more difficult to discharge since it raises a presumption that you had no intention of paying back that debt. Second, since your credit card debt will most likely be discharged, your credit card company will probably not want to extend you additional credit. However, since you will soon be in a better financial position, you will most likely start receiving credit card offers within a very short time after receiving your discharge. If you have a credit card with a zero balance, even though they will not be listed in your bankruptcy they will likely close your account. You can ask that your account be reopened which is done on a case-by-case basis. This may require getting a secured credit card, where you put down a payment to serve as collateral and you are extended credit up to the limit of the amount of the collateral. After you have proven that you are able to keep up with payments, you will likely be able to get an unsecured credit card with better interest rates and higher credit limits.

What debts are discharged? All of them?

After you have received a discharge, most of your debts will be discharged, however certain debts will remain. The most common debts that are not discharged are:

Child support, alimony

Certain tax debts

Student loans

Who qualifies for bankruptcy?

Most people who are in a rough position financially are eligible for bankruptcy provided they are not disqualified by recent past bankruptcy filings.

How do I stop creditors from harassing me?

Once you have retained one of our attorneys, you may inform your creditors that you have retained our firm to file a bankruptcy and give them our name and number. Once your petition is filed, your creditors will be subject to penalties if they attempt to contact you or collect a debt.

Is bankruptcy the right choice?

Bankruptcy is not the right choice for everyone. Often there are other ways to manage your debt.

Does my spouse need to file?

Your spouse does not need to file. However, based on the details of your circumstances, it may make the most sense for you both to file a joint bankruptcy petition.

How will my spouse be affected?

This is a very complex area in bankruptcy. Your attorney will be able to advise you of how your spouse will be affected after reviewing your particular situation.

Who should not file for bankruptcy?

Generally, people who are in a stressed financial situation are eligible for bankruptcy. However, people who own and want to retain too much property and cannot propose a play that would allow them to keep their property may not want file for bankruptcy since their property could be liquidated by the trustee.

What will happen to my property? Will the trustee sell everything?

Our goal is to qualify all of your property as exempt so that the trustee won't be able to sell anything.

Can I stop a foreclosure on my home?

A bankruptcy proceeding will stop any foreclosure actions on your home. This does not necessarily permanently stop the foreclosure, but a bankruptcy might be able to help you get caught up on payments or give you some breathing room.

What happens if a creditor tries to collect after filing bankruptcy?

Once your bankruptcy is filed, creditors will not be allowed to take any actions to collect on a debt. If they fail to abide by this order, they will be subject to being penalized.

What is a “lien strip”?

A lien can be stripped when you have more than one lien on your property and the senior lien is owed more than your property is worth. If this is the case, the junior lien can be stripped off and treated as unsecured debt which can be discharged. Liens can only be stripped in Chapters 13 and 11, but not in Chapter 7 case.

What do I do after my case is closed?

After you have received your discharge and your case is closed, you should work towards rebuilding your credit and taking better care of your finances. You will be in a much better position to achieve this.

How easy is bankruptcy?

Bankruptcy can be a very difficult process. However, with the help of an experienced attorney, it can go through very smoothly for you.

Will I have to go to court? What is a 341 hearing?

Your “day in court” for your bankruptcy is the 341(a), meeting of the creditors hearing. This is where you will go before the bankruptcy trustee with one of our attorneys and be asked questions about your bankruptcy. The name “meeting of the creditors” is somewhat of a misnomer as creditors are rarely present. Generally, the trustee will ask you to attest the the accuracy and honesty of your bankruptcy petition, ask a few simple questions, and you will be free to leave.

What are my alternatives to filing?

Bankruptcy is not for everyone as there are alternatives. Our consultations are free and our attorneys will review your various options with you and will not advise you to file for bankruptcy unless they believeit is the best course of action for you.

I have filed bankruptcy in the past, can I file again?

Filing for bankruptcy can limit your ability to file again in the future. Generally, if you file for Chapter 7 bankruptcy, you cannot do so again for 8 years. However, you may still be eligible to file for Chapter 13 bankruptcy.

What is the timeline of a bankruptcy case?

Generally, a Chapter 7 case will take around four months from the date of filing until the date of discharge. A Chapter 13 Plan will take between three to five years to complete.

How much does it cost?

Our fees are very reasonable in relation to our attorneys' skill and experience. Also, unlike many attorneys, we do offer payment plans since we know that your financial situation is already burdened. At the time of your free initial consultation, the attorney should be able to quote a fee for you.

What is a “petition preparer”?

A petition preparer is a person that can assist you in filing for bankruptcy. However, petition preparers are not attorneys and are prohibited from advising you. Petition preparers often cause dire harm such as dismissed cases, repossessed property, or other more malicious illegal activity. If you have already met with a petition preparer and fear that your case is not being handled properly, please contact us and we will likely be able to fix any errors and ensure that your case proceeds smoothly and does not cause any harm to you and your family.

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Bankruptcy

Our firm has extensive experience and expertise in bankruptcy, having two Certified Bankruptcy Law Specialists, and we can assist most individuals, married couples and businesses with their financial problems through Chapters 7 and 13.

Client Review

Richard and his team were extremely helpful throughout the BK process. Richard Heston answered all of my many questions and was generous with his time. His staff is well organized, which made a difficult process relatively simple. My bankruptcy was due to a business failure. Heston & Heston helped me understand the personal and business issues both pre and post bankruptcy.